Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1 Filing Table of Contents
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1: S-1/A Pre-Effective Amendment to Registration Statement HTML 3.40M
(General Form)
21: CORRESP ¶ Comment-Response or Other Letter to the SEC HTML 118K
2: EX-1.(A) Underwriting Agreement HTML 301K
3: EX-4.(D) Instrument Defining the Rights of Security Holders HTML 15K
4: EX-4.(E) Instrument Defining the Rights of Security Holders HTML 15K
5: EX-5 Opinion re: Legality HTML 19K
6: EX-8 Opinion re: Tax Matters HTML 80K
7: EX-10 Material Contract HTML 54K
8: EX-10.(H)(1) Material Contract HTML 30K
9: EX-10.(H)(2) Material Contract HTML 26K
10: EX-10.(H)(3) Material Contract HTML 48K
11: EX-10.(O) Material Contract HTML 52K
12: EX-10.(Q) Material Contract HTML 121K
13: EX-10.(R) Material Contract HTML 37K
14: EX-10.(S) Material Contract HTML 76K
15: EX-10.(T) Material Contract HTML 33K
16: EX-10.(U) Material Contract HTML 35K
17: EX-10.(W) Material Contract HTML 1.05M
18: EX-10.(X) Material Contract HTML 55K
19: EX-23.(A) Consent of Experts or Counsel HTML 12K
20: EX-24 Power of Attorney HTML 16K
Delayed-Release ‘CORRESP’ — Comment-Response or Other Letter to the SEC
This
letter is in response to your comment letters dated November 17, 2006 and
December 6, 2006 concerning the above-referenced filing. For your convenience,
we first restate your comments in italics and then provide our response. The
responses in this letter are based on representations made by the Program and
its Managing General Partner, Atlas Resources, LLC, to Kunzman & Bollinger,
Inc. for the purpose of preparing this letter. Also, we are sending four marked
courtesy copies of Pre-Effective Amendment No. 1 by separate correspondence.
Unless otherwise noted, all page references in our responses to the prospectus
are to the form of prospectus included in Pre-Effective Amendment No. 1 to
the
Registration Statement.
General
1.
To
minimize the likelihood that we will reissue comments, please make
corresponding changes where applicable throughout your
document.
Parallel
changes to all disclosures affected by your comments have been made in the
Pre-Effective Amendment No. 1 to the Registration Statement.
2.
Please
update the financial statements of Atlas Resources, LLC and Subsidiary
in
accordance with Rule 3-12 of Regulation
S-X.
In
addition, please tell us why you believe it is appropriate to include only
two
years of audited statements of income, changes in stockholder’s equity and cash
flows of Atlas Resources, LLC and Subsidiary in the registration
statement.
Atlas
Resources, LLC will show three years of updated audited statements of income,
changes in member’s equity and cash flows in the registration statement
in accordance with Rule 3-12 of Regulation S-X in Pre-Effective Amendment
No.
2
Please
submit all written sales materials proposed to be transmitted to
prospective investors, orally or in writing. Please be aware that
we will
need time to review these
materials.
The
Program acknowledges your comment.
4.
As
required by Industry Guide 5(2), please place the required suitability
information immediately after the cover
page.
The
Program has moved the suitability information to immediately follow the cover
page of the prospectus. The section is entitled “Suitability
Standards.”
5.
Please
note that we may have additional comments upon completion of our
engineering review.
The
Program acknowledges your comment.
Cover
Page
6.
We
note that you are offering up to 19,900 Converted Limited Partner
Units
and 100 Limited Partner Units. As the distribution circumstances
are
different from the offerings - resulting in different entitlements
-
provide separate footnote explanations for the Converted Limited
Partner
Units and the Limited Partner
Units.
The
Program has revised the footnotes to the “Calculation of Registration Fee” table
on the inside cover page of Pre-Effective Amendment No. 1. The Program has
also
added a footnote on the cover page of the prospectus to clarify that it is
offering limited partner units and investor general partner units that are
automatically converted to limited partner units after drilling is completed,
which includes a brief discussion of the entitlements and a cross-reference
to
the “Summary of the Offering - Description of Units” section of the
prospectus.
Summary
of the Offering, page 1
7.
Please
ensure that you provide all the information required by Industry
Guide
5(3), including:
·
the
intended termination date of the
partnerships;
·
state,
if true, that the managing general partner and affiliates will receive
substantial fees and profits in connection with the offering;
and
state
the estimated maximum time from the closing date that investors might
have
to wait to receive
distributions.
The
Program has added the intended termination date of the partnerships to the
“Summary of the Offering - Terms of the Offering” section on page 8. The
intended termination date of the partnerships also appears in the “Terms of the
Offering - Subscription to a Partnership” section on page 51.
The
Program has added that the “managing general partner and affiliates will receive
substantial fees and profits in connection with the offering” to the “Summary of
the Offering - Business of the Partnerships and the Managing General Partner”
section on page 6 and the “Summary of the Offering - Compensation” on page
13.
The
Program has added that the estimated maximum time from the closing date that
investors might have to wait to receive distributions in the “Summary of the
Offering - Five Year-50% Subordination, Participation in Costs and Revenues,
and
Distributions” section on page 11 and the “Participation in Costs and Revenues
- Subordination of Portion of Managing General Partner’s Net Revenue Share”
section on page 108.
8.
For
clarity, please describe, by way of example, those costs you characterize
as intangible drilling costs. Also explain when a well will be deemed
to
be completed.
The
Program has clarified by example those costs that are characterized as
intangible drilling costs in “Summary of the Offering - Description
of Units - Investor General Partner Units” and has explained
when a well will be deemed to be completed in “Summary of the
Offering - Investor General Partner Units” on
page 10 and in “Investment Objectives” on page 30. This explanation
provides:
“In this regard, a well is deemed to be completed when production equipment
is
installed on a well, even though the well has not been connected to a pipeline
for production of natural gas.”
Risk
Factors, page 1
9.
We
note the statement indicating that the managing general partner “may
subordinate” its entitlement to distributions. Your disclosure on page 5
indicates that the managing general partner “will” rather than “may”
subordinate such entitlement. If necessary, revise to reconcile or
disclose the reason why the managing general partner may not subordinate
its entitlement to
distributions.
The
Program has modified the disclosure in the “Summary of the Offering - Risk
Factors” section on page 7 to clarify that it will
subordinate if the investors do not receive a 10% return of capital in each
of
the first five 12-month periods.
Confirm
to us that the investor general partner units in other programs sponsored
by the managing general partner were converted into limited partner
units
only after all of the partnerships’ wells were drilled and completed. If
not, disclose and explain the reasons that prevented the
conversions.
The
Managing General Partner confirms that the investor general partner units in
other programs sponsored by the managing general partner were converted into
limited partner units only after all of the relevant partnership’s wells were
drilled and completed.
Limited
Partner Units, page 5
11.
Please
disclose for how long intangible costs can be carried forward and
be
deducted.
The
Program modified its disclosure as to how long intangible costs can be carried
forward and be deducted in “Summary of the Offering - Description of Units -
Limited Partner Units” on page 10 and “Risk Factors - Tax Risks - Limited
Partners Need Passive Income to Use Their Deduction for Intangible Drilling
Costs” on pages 26 and 27.
Risk
Factors, page 8
Investments
Objectives, page 22
12.
Please
explain why “if all or the majority of the units are sold in Atlas America
Public #162007 (A) L..,” it may take longer for cash distributions to
begin and the conversions of investor general partner units to limited
partner units may be delayed.
The
Program has deleted the disclosure in “Investment Objectives” on page 10 and
“Actions to be Taken By Managing General Partner to Reduce Risks of Additional
Payments By Investor General Partners - Conversion of Investor General Partner
Units to Limited Partner Units” on page 33 related to delayed cash
distributions, since the timing of distributions would not be affected by the
number of units sold. Also, the Program has explained the reason for the delay
in the conversion of investor general partner units to limited partner units
as
follows:
“This
will delay conversion of the investor general partner units to limited partner
units since the managing general partner will not convert the investor general
partner units to limited partner units in a partnership until after all of
the
partnership’s wells have been drilled and completed.”
Actions
to be Taken by Managing General Partner to Reduce Risks…, page
24
13.
Disclose
the number of partnerships that the managing general partner has
agreed to
indemnify.
The
Program has disclosed the number of partnerships that the managing general
partner has agreed to indemnify. The “Actions to be Taken By Managing General
Partner to Reduce Risks of Additional Payments By Investor General Partners
-
Indemnification” section provides on page 33 as follows:
“...The
managing general partner has agreed to this indemnification obligation in 51
of
its prior partnerships.”
Compensation,
page 29
14.
We
note the narrative description of the managing general partner’s
compensation. If practicable, please also present the information
in
tabular form, as required by Guide
5(4)(A).
The
information has been presented in tabular form following the “Compensation -
Estimate of Administrative Costs and Direct Costs to be Borne by the
Partnerships” section beginning on page 46.
15.
We
note the discussion regarding the managing general partner’s compensation.
Based on the disclosed compensation, it appears that you may be required
to include dilution information in accordance with Item 506 of Regulation
S-K. In this regard, please refer to Industry Guide
5(4)(D).
The
“Compensation - Natural Gas and Oil Revenues” section has been revised on pages 38 and 39 to provide a bar chart evidencing the managing general partner’s revenue
share when it contributes 25% of the capital contribution and a bar chart
evidencing the managing general partner’s revenue share when it contributes 35%
of the capital contribution.
Drilling
Contracts, page 31
16.
Please
identify the independent industry association your reference and
provide
us wth a copy of the survey. If this information is not publicly
at little
or nominal charge, please provide a consent from this association
to be
named in the prospectus.
The
Program has identified the independent industry association in Pre-Effective
Amendment No. 1 and will submit supplementally a copy of the survey and the
consent to the reference.
Please,
by way of example, describe the material adverse events that may
cause the
managing general partner to substitute a currently proposed prospect
for a
new prospect.
The
Program has described the material adverse events that may cause the managing
general partner to substitute a currently proposed prospect for a new prospect.
The “Proposed Activities - Primary Areas of Operations” section of the
prospectus provides on page 85 as follows:
“The
managing general partner will substitute a new prospect if there are material
adverse events with respect to any of the currently proposed prospects. For
example, the managing general partner will substitute a prospect
if:
·
the
latest geological and production data in the area from new wells
being
drilled indicates that the well may be non-productive or less productive
than anticipated;
·
there
are potential title problems;
·
drilling
rigs, tubular goods and services in the area will not be
available;
·
approvals
by federal and state departments or agencies cannot be obtained;
or
·
other
properties are available that appear to be of a higher
quality.”
18.
Please
discuss the criteria that the managing general partner will apply
in
selecting prospects for
drilling.
The
Program has discussed the criteria that the managing general partner will apply
in selecting prospects for drilling. The “Proposed Activities - Overview of
Drilling Activities” section of the prospectus provides on page 84 as
follows:
“In
selecting prospects for drilling, the managing general partner will use the
following criteria from adjacent prospects or in the immediate area to the
extent available to it, such as production information, sand thickness,
porosities and water saturations which lead the managing general partner to
believe that the proposed well locations will be productive. In
most cases,
a
prospect must be classified as proved undeveloped before the managing general
partner will drill the well, which generally means that the well is being
drilled to a geologic feature which contains proved reserves and is adjacent
to
a prospect that has or had a productive well. See the partnership agreement
for
the complete definition.”
Disclose
what conditions will prompt the managing general partner to select
prospects in the secondary
areas.
The
Program has set forth the conditions that will prompt the managing general
partner to select prospects in the secondary areas. The “Proposed Activities -
Secondary Areas of Operations” section of the prospectus on page 88 provides as
follows:
“The
conditions which will prompt the managing general partner to select properties
in the secondary areas are access
to prospects that meet the same criteria as the primary areas, which are described
in “- Overview of Drilling Activities.” However, the managing general
partner does not have available to it as many prospects in the secondary areas
as it does in the primary areas.”
Conflicts
of Interest, page 91
20.
We
note that “[t]he following discussion describes certain possible conflicts
of interest….” Your discussion should address all the material possible
conflicts of interest that may arise. Revise
accordingly.
The
“Conflicts of Interest - In General” section has been revised on page 112 as
follows:
“The
following discussion describes all
material
possible
conflicts of interest that may arise for the managing general partner and its
affiliates in the course of each partnership.”
Summary
of Partnership Agreement, page 135
Amendments,
page 135
21.
Please
state what type of amendments could materially and adversely affect
investors. Provide examples.
The
Program has stated what types of amendments to the partnership agreement could
materially and adversely affect investors. The “Summary of Partnership Agreement
- Amendments” section, as revised on page 156 includes the following
disclosure:
“...For
example, an amendment may not increase the duties or liabilities of the
investors, decrease the duties or liabilities of the managing general partner,
decrease the investors’ profit sharing interest, or increase the investors’ loss
sharing interest, increase the required capital contribution of the investors
or
decrease the required capital contribution of the managing general partner
without the approval of the investors, and any amendment may not affect the
classification of partnership income and loss for federal income tax purposes
without the unanimous approval of all investors.”
Please
explain the basis for relying on the exemption provided by Rule 3a4-1
of
the Exchange Act.
The
Program has explained the basis for relying on the exemption provided by Rule
3a4-1 of the Exchange Act in the “Plan of Distribution” section, which has been
amended on page 163 to include the following:
“...Units
may also be sold by the officers and directors of the managing general partner,
other than those individuals who are associated persons of Anthem Securities,
in
those states where they are licensed to do so or are exempt from licensing.
All
offers and sales of units by the managing general partner’s officers and
directors who are not associated persons of Anthem Securities will be made
under
the SEC safe harbor from broker/dealer registration provided by Rule 3a4-1.
In
this regard, none of the officers and directors of the managing general partner
who may offer and sell units:
·
is
subject to a statutory disqualification, as that term is defined
in
Section 3(a)(39) of the Act, at the time of his
participation;
·
is
compensated in connection with his participation by the payment of
commissions or other remuneration based either directly or indirectly
on
transactions in securities; and
·
is
at the time of his participation an associated person of a broker
or
dealer.
Also,
each of the officers and directors who may offer and sell units:
·
performs,
or is intended primarily to perform at the end of the offering,
substantial duties for or on behalf of the
managing general
partner otherwise than in connection with transactions in
securities;
was
not a broker or dealer, or an associated person of a broker or dealer,
within the preceding 12 months; and
·
will
not participate in selling an offering of securities for any issuer
more
than once every 12 months, with the understanding that for securities
issued pursuant to Rule 415 under Securities Act of 1933, the 12
month
period begins with the last sale of any security included within
one Rule
415 registration.”
Exhibits
and Financial Statement Schedules, page 2
23.
Please
provide a form of the lease agreements referenced in “Title to Properties”
on page 74.
A
form of
the lease agreements referenced in “Title to Properties” is included as Exhibit
B to the Drilling and Operating Agreement, which is Exhibit (II) to the form
of
partnership agreement included as Exhibit (A) to the prospectus.
We
note that counsel has opined that the securities being registered
“will be
validly issued, fully paid, and nonassessable,” except in certain
specified circumstances. It is not clear whether the exception applies
to
all the three legality issues opined upon or to only assessibility.
Please
revise.
The
opinion has been revised to clarify that the limitations relate only to
assessibility. It provides as follows:
“The
Units, when issued and sold in accordance with the Registration Statement,
as
amended at the time it becomes effective with the Commission, and
on
the filing with the Delaware Secretary of State of a
certificate of
the
respective Partnership Agreement for the Partnership to which the respective
Units relate, or
an
appropriate amendment or amendments to the
Partnership
Agreement, reflecting the admission of the subscribers for Investor General
Partner Units as additional general partners to
the
Partnership or,
thereafter, the conversion of the Investor General Partners to Limited Partners,
in accordance with Delaware law, and when issued against payment for
the
Investor General Partner Units as
contemplated by the Prospectus and each Partnership
Agreement, will be validly issued
and fully paid and nonassessable, except that with
respect to non-assessibility the
Managing General Partner may call for additional Capital Contributions from
the
Investor General Partners, including Investor General Partners who have been
converted to Limited Partners, in a Partnership if necessary to pay that
Partnership’s obligations or liabilities:...”
Please
explain, in an appropriate section in the registration statement,
how an
investor will be able to ascertain whether his units are subject
to
assessibility.
The
Program has set forth in the “Summary of the Offering - Investor General Partner
Units” section on pages 9 and 10 how an investor will be able to ascertain whether
his units are subject to assessibility. It provides as follows:
“...You
will be able to determine if your units are subject to assessibility based
on
whether you buy investor general partner units, which are subject to
assessibility, or limited partner units, which are not subject to
assessibility.”
Atlas
Resources, Inc. and Subsidiary
Financial
Statements
Note
2
- Summary of Significant Accounting Policies, page F-13
Note
5
- Certain Relationships and Related Party Transactions, page
F-21
26.
We
note that Atlas Resources, Inc. paid management fees of $47.3 million
and
$23.7 million for the years ended September 30, 2005 and 2004,
respectively. Please disclose where these amounts are recorded in
your
statements of income.
This
will
be addressed in Pre-Effective Amendment No. 2.
We
note your disclosure of a 10% gathering fee to be paid by your
partnerships. Please tell us how these gathering fees are incorporated
in
the estimates of proved reserves that generated the future net cash
flows
disclosed on pages 48 and 49.
The
10%
gathering fees are included as a deduction from the gas and oil revenues
generated from the forecasted production of each well in the partnerships.
This
affects the projected cash flows and the ultimate recoverable reserves by
decreasing the well’s projected economic life.
We
note your disclosure explaining that ten of your partnerships’ proved
reserves and associated future net income figures were reviewed by
a third
party petroleum consultant. Please amend your document to describe
the
procedures performed by and the conclusions reached by your consultant.
Address whether the consultant verified the accuracy and completeness
of
information furnished by you with respect to ownership interests,
oil and
gas production, historical costs of operation and development, product
prices, and agreements relating to current and future operations,
and
transportation and sales of production. Explain to us the reasons
for not
reviewing the other 43
partnerships.
The
Program has amended the disclosure to provide that the reserve reports
were actually prepared by its consultant, Wright & Company Inc. (“Wright & Company”)
instead of reviewed. Thus, the accuracy and completeness of the information
provided were reviewed for reasonableness by our consultant. This information
included the ownership interest, oil and gas production volumes, historical
costs of operation, product prices, and agreements relating to current
and
future operations, and transportation and sales of production.
The
other
43 partnerships’ reserves were not prepared or reviewed by our consultant,
Wright & Company, Inc. since the partnership agreements did not require that
this be done. However, the managing general partner’s reservoir engineer
prepared an unaudited reserve evaluation of each partnership.
Footnote
(7) to Table 3 “Investor Operating Results - Including Expenses” on
page 62 has been revised as follows:
(7)
The
information presented in this column has been prepared in conformity with SEC
guidelines by making the standardized estimates of future net cash flow from
proved reserves using natural gas and oil prices in effect as of the date of
the
estimates, which was a weighted average price of $10.08 per mcf for the natural
gas, and which are held constant throughout the life of the properties. The
information presented for future net cash flows based on estimated proved
reserves was
prepared
by
an
independent petroleum consultant, Wright & Company, Inc., as noted below
with respect to the managing general partner’s prior public partnerships and
three Regulation D offerings which were registered under
Section 12(g) of the Securities Exchange Act of 1934: Atlas-Energy for the
Nineties-Public #1 Ltd., Atlas-Energy for the Nineties-Public #2 Ltd.,
Atlas-Energy for the Nineties-Public #3 Ltd., Atlas-Energy for the
Nineties-Public #4 Ltd., Atlas-Energy for the Nineties-Public #5 Ltd.,
Atlas-Energy for the Nineties-Public #6 Ltd., Atlas-Energy for the
Nineties-Public #7 Ltd., Atlas-Energy for the Nineties-Public #8 Ltd., Atlas
America Public #9 Ltd., Atlas America Public #10 Ltd., Atlas America Public
#11-2002 Ltd., Atlas America Public #12-2003 Limited Partnership, Atlas America
Series 25-2004(A) L.P., Atlas America Series 25-2004(B) L.P., Atlas America
Public #14-2004 L.P., Atlas America Public #14-2005(A) L.P., Atlas America
Series 26-2005 L.P., and Atlas America Public #15-2005(A) L.P. The future
net cash flows based on the reserve information for the other
partnerships were
not prepared
or reviewed
by Wright & Company, Inc.,
but instead
the reserve information was prepared by the managing general partner’s reservoir
engineer. You
should understand that reserve estimates are imprecise and may change. There
are
inherent uncertainties in interpreting the engineering data and the projection
of future rates of production. Also, prices received from the sale of natural
gas and oil may be different from those estimates in preparing the reports,
and
the amounts and timing of future operating and development costs may also differ
from those used. The cash flow information based on estimated proved reserves
shown for a partnership does not include this information for the managing
general partner.
Other
updating and conforming changes have also been made in Pre-Effective Amendment
No. 1.
Please
contact the undersigned or Gerald A. Bollinger if you have any questions or
comments concerning this response.
Very
truly yours,
KUNZMAN
& BOLLINGER, INC.
/s/ Wallace
W. Kunzman, Jr.
Wallace
W. Kunzman, Jr.
cc:
Mr. Jack
Hollander
Mr. Justin
Atkinson
Dates Referenced Herein and Documents Incorporated by Reference
